2018: a turbulent year for Vietnam stock market

The first quarter saw record-breaking VN-Index growth, but the market plunged to its worst post-2008 crisis performance soon after.

With a 48 percent increase in 2017 to end with 984.24 points, the VN-Index was ranked among the highest growth indexes in the world. As such, early reports assessing market prospects for this year expected the VN-Index to continue its double-digit growth this year to reach 1,120 or even 1,250 points.

The first two months of 2018 showed that these projections were not unfounded, with the Index quickly passing the 1,000 and 1,100 milestones.

Consecutively in February and March, Vietnam stood among stock markets with the strongest growth in the world, along with Brazil, Russia and Argentina, with a staggering 200 points increase in the first quarter.

By the end of March, for the first time in a decade, it had met its pre-crisis 2007 peak at 1,171 points. Less than half a month later, on April 9, it climbed to 1,204 points, its highest figure ever.

Vietnam's benchmark was among those with the highest growth globally after the first quarter of 2018. Photo by IdexQ

The higher you go...

However, the soaring index and stock prices turned out to a flash in the pan in the context of 2018 performance as a whole.

With instability from international markets, such as the escalating trade war, the U.S. Federal Reserve raising the interest rates, the appreciation of the greenback, as well as fluctuations in the commodity markets, especially crude oil, the situation only worsened to reverse all previous forecasts.

These systemic risks derailed the VN-Index from its early-year growth forecasts.

Vn-Index in 2018. Photo by VNDirect

By late April, the upward trend had been replaced by powerful fluctuations across trading sessions, but clearly going downwards.

Despite new share issues and IPOs worth billions of U.S. dollars, as well as record sessions where VND35 trillion ($1.51 billion) worth of shares of Vinhomes, the residential property development unit of Vietnam’s biggest private company Vingroup, were sold in its initial offering in early May, the VN-Index continued to nosedive.

All the gains that saw it become Asia-Pacific’s top equity market in Q1 were wiped out in the following three months. The VN-Index recorded the deepest plunge from its peak, compared to regional markets. The drop of nearly 18 percent in a quarter has marked the worst period of the market since its crash in Q4 2008.

Vn-Index recorded the steepest decline globally in Q2/2018

Positive forecasts were then gradually replaced by cautions. In one of its July articles Bloomberg commented: "Anyone investing in Vietnam’s stock market these days must have solid nerves."

Bloomberg noted Vietnam’s stock turmoil hitting an 8-year high, with foreign investors fleeing a market that has lost $29 billion in value.

Apart from deterring investors, the market plunge undermined the confidence of current players.

Many investors, after unsuccessful attempts at bottom fishing, decided to freeze their accounts and leave the market. From trading sessions of VND9-10 trillion ($387-430 million) earlier, transaction values of half this amount were deemed miracles during this period.

Even professional investors such as large investment funds struggled. Pyn Elite Fund, one of the largest operating foreign funds in the market, was down by 13 percent in net asset value as of the end of November. Other major names did no better, all sinking into the red by mid-year.

The VN-Index fell below its 1,100 mark, hovered around the 1,000 mark, then plunged to even lower than 900 points.

"Has the market hit the bottom?"

"Is it time to be greedy?"

"Chance to recover"

These were typical headlines on analysis reports by security companies whenever the VN-Index fell below yet another notch. However, as the market fell further, ‘bottom fishing’ proved to be extremely risky.

Blue-chips in the VN30 basket, representing the 30 largest stocks in terms of capitalization, fell in value by 20-40 percent of their market price compared to peaks earlier in the year.

Those holding stocks in the financial sector such as banking, securities, insurance, real estate, as well as oil and gas, flocked to the markets to get rid of their shares.

In the last days of 2018, instead of exceeding four figure thresholds as forecasted at the beginning of the year, the VN-Index is left struggling around the 900-point level, not only having erased all traces of its Q1 peak but losing a net 10 percent compared to the end of 2017.

An investor looks at the Vn-Index benchmark. Photo by VnExpress/Anh Tu

So what color will the 2019 market sport?

Securities companies have not made bold forecasts of growth so far. They have cautious observations laced with generous doses of flexibility.

After considering all possible factors affecting the market, Vietcombank Securities (VCBS) has said in its recent report said that the main indexes will fluctuate by a large margin this year.

The VN-Index is likely to fluctuate in the range of 300-350 points based on the following assumptions: FED interest rate hikes will likely continue in 2019; the U.S. and China will not be able to reach a comprehensive trade agreement right next year; and Vietnam's economy will continue to maintain its growth momentum with good control on inflation and exchange rates.

Bernard Lapointe, head of research of Rong Viet Securities, said in a Bloomberg interview recently that he is optimistic but not too optimistic about the market next year. He expects the VN-Index to stay within the 900-1,000 points range until the end of next year.

Meanwhile, Michel Tosto, head of Institutional Sales and Brokerage of Viet Capital Securities, predicted that the VN-Index could reach 1,060 points at the end of next year, a 16 percent rise from the current level.